Building equity Barrie ON
What is equity?
To make it simple, equity is the difference between the current value of a property and the balance of all mortgage obligations. Building equity in your home should be one of every home owners primary goals. As an example let’s say that your home is appraised at $250,000 at a Comparative Market Analysis “CMA” and you have a mortgage balance of $200,000 , then you also have $50,000 in equity ($250,000 – $200,000 = $50,000). Providing the market remains stable and doesn’t crash therefore lowering the value of your home , then that $50,000 is like a savings account just waiting to grow as your mortgage payment reduce the balance owing and the value of your home rises. The appreciation of equity in a home is one of the most successful paths to wealth available.
Every month the equity in your home should be higher then the last and the sooner you find that the mortgage has been paid off, the sooner you’ll find you’ll have less financial stress and the path to a comfortable or early retirement has been laid.
Here are a few ways to build equity
Higher initial down payment is one of the most obvious way to build equity when first buying a home. Your extra money immediately reduces the mortgage balance owing , therefore increasing equity and it also makes your extra money less tempting to spend on something useless.
Extra principle payments will also help build equity in two ways. First every payment you send reduces the debt by the usual amount and second reducing the debt also reduces the interest, therefore more of the payment goes towards the principle and not the mortgage interest.
Home improvements will build equity but caution should be taken when choosing what exactly to improve. Improving the quality and/or size of your home usually makes it worth more thus building equity. Remodelling rooms like kitchens and bathrooms will likely give you a greater return then installing a pool.
Reducing debt load also reduces stress and being stress free is healthy , therefore building equity is not only good it’s good for you. Following the steps above should put you on the path to a stress free future and that alone is worth a fortune.
Nathan Pile
Napoleon Home Inspections
